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IceJOKER [234]
3 years ago
7

World-Tour Co. has just now paid a dividend of $2.83 per share (Div0); its dividends are expected to grow at a constant rate of

6 percent per year forever. If the required rate of return on the stock is 16 percent, what is the current value of the stock, after paying the dividend
Business
1 answer:
levacccp [35]3 years ago
4 0

Answer:

the current value of the stock is $30

Explanation:

The computation of the current value of the stock is given below:

Price of stock today is

= Dividend per share × (1 + growth rate) ÷  (required rate of return - growth rate)

= $2.83 × (1 + 0.06) ÷  (0.16 - 0.06)

= $2.9998 ÷ 0.10

= $29.9980  

= $30

Hence, the current value of the stock is $30

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